MUMBAI: The Indian rupee is poised to weaken at Monday’s open, with the market’s focus swinging back to oil after Iran expanded strikes on Gulf states following U.S. attacks, reviving risks to India’s trade balance.
The rupee is expected to open in the 95.55-95.60 range against the U.S. dollar on Monday, traders said, after settling at 95.3250 on Friday.
For the local currency, the focus has swung back to crude oil prices after hostilities between the United States and Iran re-escalated, with U.S. President Donald Trump saying the ceasefire is over.
The rupee traded in a 94.96-95.60 range last week, largely mirroring moves in crude oil, for which India relies heavily on imports to meet its requirement. Traders expect that relationship to persist this week with markets assessing the implications of the latest Middle East strikes and counter-strikes on energy supplies.
Beyond the focus on oil, market participants are watching how the Reserve Bank of India responds, a currency trader at a private-sector bank said.
Bankers said the RBI has been providing its usual support to the rupee, and the extent of intervention could become more pronounced due to the potential impact from rising oil prices.
The private-sector bank trader added that he is monitoring the impact of oil-driven inflation concerns on U.S. Treasury yields.
OIL JUMPS
Brent crude jumped more than 4% to $79.28 a barrel in Asian trading.
Over the weekend, Tehran expanded its attacks to Qatar and the United Arab Emirates, while the United States launched fresh hits on Iran, in the latest part of a cycle of attacks and counter-attacks tied to shipping through the Strait of Hormuz.
Trump said on Sunday that the Strait remained open to commercial traffic. Earlier, Iran had indicated the strait had been shut.
“The latest exchange of strikes has raised fresh doubts about the prospects for a lasting agreement, despite continuing diplomatic contacts,” ANZ Bank said in a note.
(Reporting by Nimesh Vora; Editing by Ronojoy Mazumdar)
